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Informist, Monday, Jul. 27, 2026

By Avishek Rakshit

KOLKATA – ITC Ltd. is expected to continue to feel the pinch of a decline in cigarette sales for a second consecutive quarter in Apr-Jun. As cigarettes comprise 47% of its top line and over 70% of its bottom line, ITC's earnings for the June quarter are expected to be direly affected.

The country's largest cigarette company is expected to report a 9% on-year and a 13% on-quarter decline in its net profit for the June quarter at INR 45 billion, according to the average of estimates from 13 brokerages. The company's revenue is expected to decline over 5% on year, but rise 16% on quarter to nearly INR 187 billion for the June quarter, according to the estimates. 

The highest estimate for ITC's net profit is INR 65 billion from Nirmal Bang Equities Pvt. Ltd. and the lowest is INR 37 billion from Kotak Securities Ltd. The highest estimate for revenue is INR 264 billion from JM Financial Institutional Securities Pvt. Ltd. and the lowest is INR 153 billion from Systematix Shares and Stocks (India) Ltd.

VOLUME PRESSURE

Brokerages expect ITC's cigarette sales volumes to decline 8-10% on year in the June quarter. In the cigarette industry, this is considered a substantial decline. As smokers continue to downgrade purchases or reduce cigarette consumption owing to high prices, ITC's revenues from cigarettes are expected to decline 18-20% on year, brokerages said. Among cigarette segments, the Kings premium category posted the sharpest decline in sales in the June quarter, while sales of mid-premium products were weak. The budget category, comprising sizes lower than Mini Kings, fared better than the Kings category. 

To discourage smoking and bring the tax on cigarettes close to the World Health Organization-recommended 75%, the government in February increased the goods and services tax on cigarettes to 40% from the earlier slab of 28% and also introduced a new excise duty in the range of INR 2,050-INR 8,500 per 1,000 sticks on cigarettes. Effectively, it pulled up the net tax on cigarettes to 60-70%, depending on the length, from the previous 50-55%.

The government's move led ITC – which has a 70% market share in the legal cigarettes industry – and its closest competitor Godfrey Phillips India Ltd. to hike prices between 21% and 41%, depending on the cigarette brand. 

For instance, a 10-stick pack of Gold Flake Kings or Classic is now priced at INR 240, against INR 170 earlier, and a 10-stick pack of Wills Navy Cut--a bestseller in east India--is now priced at INR 140, compared to the earlier price of INR 110. Gold Flake Premium--the go to brand for the lower middle-income group in the country--saw the price increase to INR 115 from INR 95 for a 10-stick pack.

OTHER SEGMENTS

Nuvama Wealth Management Ltd. said ITC's consumer goods business, which accounts for around 30% of its top line but contributes less than 1% to its profit, is likely to rise 14% on year with earnings before interest and tax up 25% on year, driven by a favourable base and improving margins.

However, the war in West Asia could weigh on ITC's agricultural trading business. Although the company does not majorly focus on exports in this region, it exports tobacco leaves, wheat, and other agricultural commodities, and the shipping routes for these goods pass through West Asia. ITC's strategic agricultural business, which earns it foreign exchange and acts as commodities procurement front for its cigarettes and consumer goods business, is expected to decline 10% in terms of revenue and 8% in terms of profit, brokerages such as Nuvama expect. 

Growth in the paperboards business is expected to remain subdued but improve on quarter, according to sector analysts. This is on account of tough operating conditions such as subdued domestic demand, weak export markets, weaker net realisations, and cheap Chinese supplies flooding the domestic market.

ITC is expected to report earnings before interest, tax, depreciation, and amortisation of INR 56 billion for the June quarter, according to the average of 13 estimates. The highest EBITDA estimate is INR 84 billion from brokerage Nirmal Bang and the lowest is INR 45 billion from brokerage Kotak. Nuvama estimates ITC's EBITDA margin to expand 80 basis points on year to 32.5% and the gross margin to increase 550 bps on year to 54.5% in the June quarter. 

ITC will detail its June quarter earnings on Friday. Brokerages will look out for the management's commentary on cigarette sales and consumer demand conditions after the company declares its financial results. 

On Friday, shares of ITC ended at INR 283.45 on the National Stock Exchange, up 0.8% from Thursday. The shares are down 8% since the company announced its March quarter earnings on May 21.

Of the 16 research reports on the company available with Informist, seven have a "buy" rating on the stock with an average target price of INR 357 per share. Six brokerages have a 'hold' rating on the stock with an average target price of INR 329 and three have a "sell" rating with an average target price of INR 311.

Following are the Apr-Jun earnings estimates for ITC from 13 brokerages, in descending order of the estimate of net profit, in INR billion:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Shubhayan Bhattacharya

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